The theater owner has come up with some interesting ideas, but this may be the most outlandish of the lot.
When it comes to selecting the most speculative AMC Entertainment investments, investors have a lot of options.
Is it a company willing to accept cryptocurrency as payment, or is it creating its own cryptocurrency? Maybe it’s a joint venture with another meme stock, like GameStop? (NYSE:GME) Isn’t it extreme to refuse to answer Wall Street analysts on earnings conference calls in favor of taking questions from tiny, individual shareholders? Adam Aron, the company’s CEO, did answer a question from an analyst during its third-quarter earnings call on Wednesday.
I believe that AMC genuinely embracing all of those concepts is very wise because it must continue to attract moviegoers to its theaters if it wants to get out of the deep hole it’s in. Maintaining a close relationship with small investors will certainly assist in narrowing the gap.
There is, however, a potential drawback to following every demand made by your consumers. Aron also said AMC is considering a number of other risky alternatives, including betting that the stock market will improve in order to shore up its finances. Even if it does, this move would jeopardize AMC’s fragile economic recovery.
AMC wants to get back into the content production business, and it’s considering investing in films that would be shown exclusively at AMC theaters. However, it’s a horrendous idea, just as much as it was the last time AMC attempted it.
Lights, camera, action!
Aron explained to investors that AMC’s previous raising of nearly $1.2 billion earlier this year gave the company significant flexibility in using the money to rebuild the business, one of which could be to produce its own movies.
He noted that AMC had been a 50% owner of Regal Entertainment’s Open Road Films, which won Academy Awards for best picture and best original screenplay in 2016 with the film Spotlight.
“It’s fascinating to think about if AMC would fund content now that there is such a buzz around it,” stated Aron, noting how much interest there is in media companies creating content these days. “The possibilities are endless. Will AMC fund unique content that can be viewed just at our own screens? These are all things we’ll have to look into in 2022 and beyond.”
He neglected to mention, however, that AMC had stopped producing material because it had lost a significant amount of money as a theater operator.
A box office failure
In 2011, AMC and Regal formed Open Road Films as a joint venture. The company’s first offering was Killer Elite, in which Jason Statham and Robert DeNiro played the leads. It floundered with this one. On a $70 million budget, it earned roughly $57 million in worldwide box office earnings.
Its next film did much better than the first. Liam Neeson’s thriller, The Grey, made almost $80 million worldwide on a budget of $25 million. However, despite the fact that Spotlight’s outstanding success brought in less than $100 million at the box office, AMC and Regal were unable to turn a profit.
The theater owners had collectively amassed over $90 million in losses from the time of the studio’s creation until its sale six years later, and they were unwilling to spend any more money into the business.
In the end, $28.8 million was paid for Open Road, and AMC received half of that sum in exchange for its 50% ownership stake.
Regaining lost ground
AMC announced that for the first time since the fourth quarter of 2019, practically all of its 1,000 movie theaters were operational and open at the end of March.
In the third quarter, 40 million people were entertained, and while revenue of $763 million was clearly far greater than what it earned in 2020, it had come back to almost even with the $797 million it earned two years ago.
Even so, it is still incurring significant operational losses, despite the fact that they have decreased considerably to $145 million this year from $675 million last year (it only made a $21 million profit in 2019).
Now is not the time to put a lot of money into a tough business, which Aron already understands all too well.
Bring down the lights
I appreciate AMC’s openness to ideas from its shareholders and the way it is considering ways to enhance its position past simply the movie screen, but resuming content production may stall the upward momentum it is beginning to see.
The theater owner must terminate this plan. It’s more likely to be successful with its own AMC cryptocurrency than with this one.
You must be logged in to post a comment Login